SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT"), dated as of August
1, 1997, is made and entered into by and between IWL COMMUNICATIONS, INC., a
Texas corporation ("DEBTOR"), and BANK ONE, TEXAS, N.A., a national banking
association ("SECURED PARTY").
RECITALS:
A. Borrower and Secured Party have entered into a Revolving Credit
Agreement of even date herewith, pursuant to which Secured Party has agreed
to provide a revolving loan to Borrower in an aggregate amount not to exceed
Five Million and No/100 Dollars ($5,000,000.00) (the "LOAN"), the proceeds of
which are being used for working and other general corporate purposes,
pursuant to the terms thereof (such Credit Agreement, as the same may be
amended, modified, supplemented, extended or restated and in effect from time
to time, being hereinafter referred to as the "CREDIT AGREEMENT"). Each
capitalized term used but not expressly defined herein shall have the meaning
given such term in the Credit Agreement.
B. In order to induce Secured Party to enter into the Credit Agreement
and to provide security for the Loan, Debtor shall have executed and
delivered this Security Agreement.
C. It is the intention of the parties hereto that this Security
Agreement create a first priority security interest securing the payment of
the obligations set forth in SECTION 1.02 hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce Secured Party to enter
into the Credit Agreement, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
GRANT
1.01. ASSIGNMENT AND GRANT OF SECURITY. Debtor hereby grants,
pledges and assigns to Secured Party, and hereby grants to Secured Party a
security interest in, the following assets of Debtor, and all rights, titles
and interests of Debtor therein, wherever located and whether now
SECURITY AGREEMENT Page 1
owned or hereafter acquired by Debtor or in which Debtor now has or at any
time in the future may acquire any right, title or interest (collectively,
the "COLLATERAL"):
(a) all inventory in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, (i) all raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, (ii) goods in which Debtor
has an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which Debtor has an interest or
right as consignee), and (iii) goods which are returned to or repossessed by
Debtor, and all accessions thereto and products thereof and documents
therefor (any and all such inventory, accessions, products and documents
being referred to herein collectively as "INVENTORY");
(b) any right to payment for services rendered or for goods sold or
leased which is not evidenced by an instrument or chattel paper, whether or
not it has been earned by performance ("ACCOUNTS"), and all customer lists,
subscription lists, invoices, agings, verification reports and other records
relating in any way to such Accounts, and all of Debtor's rights in, to and
under all purchase orders or contracts now owned or hereafter received or
acquired by it for goods or services, and all of Debtor's rights to any goods
represented by any of the foregoing (including returned or repossessed goods
and unpaid seller's rights) and all moneys due or to become due to Debtor
under all contracts for the sale or lease of goods and/or the performance of
services by it (whether or not yet earned by performance) or in connection
with any other transaction, now in existence or hereafter arising;
(c) all contract rights, chattel paper, documents, instruments and
letters of credit (each as defined in the Uniform Commercial Code as from
time to time in effect in the State of Texas or other applicable jurisdiction
pursuant to SECTION 5.04 hereof [the "UCC"]), and (whether or not included in
such definitions); all promissory notes, drafts, bills of exchange and trade
acceptances (collectively, the "INSTRUMENTS") of any kind owing to Debtor,
now or hereafter existing, arising out of or in connection with the sale or
lease of goods or the rendering of services or otherwise, and all rights now
or hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such contract rights, chattel
paper, documents, instruments or obligations (any and all such contract
rights, chattel paper, documents, instruments, and obligations described in
this SECTION 1.01(b) being sometimes referred to herein collectively as the
"RECEIVABLES");
(d) all machinery, equipment, tools, apparatus and furniture, now owned
or hereafter acquired by Debtor or in which Debtor now has or hereafter may
acquire any right, title or interest, and any and all additions,
substitutions and replacements thereof, wherever located, together with all
attachments, components, parts, equipment and accessories installed therein
or affixed thereto, including but not limited to all "equipment" as defined
in Section 9.109(2) of the UCC (collectively, the "EQUIPMENT");
SECURITY AGREEMENT Page 2
(e) all writings which evidence both a monetary obligation and a
security interest in or a lease of specific goods (collectively, the "CHATTEL
PAPER");
(f) all contracts and agreements (collectively, the "CONTRACTS") to
which Debtor is a party or to which Debtor has any rights, including, without
limitation, (i) all modifications, amendments or replacements of any of the
foregoing, (ii) all rights of Debtor to receive moneys due and to become due
to it thereunder or in connection therewith, (iii) all rights of Debtor to
damages arising out of, or for, breach or default in respect thereof and (iv)
all rights of Debtor to perform and to exercise all remedies thereunder;
provided, that the grant, pledge or assignment herein made shall not include
any right or interest in any contract or agreement to the extent such grant
requires the consent of any Person other than Debtor which has not been
obtained, and the failure to obtain such consent causes or could cause the
termination of said contract or agreement (provided, further, that
notwithstanding the exclusion of a security interest with respect to any
contract or agreement, the Debtor shall continue to grant to Secured Party a
security interest in the proceeds received pursuant to any such contract or
agreement);
(g) all documents, warehouse receipts, bills of lading, including,
without limitation, documents of title (as defined in the UCC) or other
receipts covering, evidencing or representing collateral;
(h) all general intangibles (as defined in the UCC), and (whether or
not included in such definition) all contract rights other than Receivables;
all inventions, processes, production methods, proprietary information, trade
secrets and know-how; all patents and applications for patents, copyrights
and trademarks of Debtor, and all licenses or other agreements granted to
Debtor with respect to any of the foregoing; all information, customer lists,
advertising lists, advertising contracts, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, telephone numbers and telephone
listings, catalogs, books, records, computer and automatic machinery software
and programs, and the like pertaining to operations by or the business of
Debtor and all licenses with respect thereto; all field accounting
information and all media in which or on which any of the information or
knowledge or data or records, may be recorded or stored and all computer
programs used for the compilation or printout of such information, knowledge,
records or data; all licenses, consents, permits, variances, certifications
and approvals of all Tribunals now or hereafter held by Debtor pertaining to
operations or business now or hereafter conducted; all rights to receive
return of deposits and trust payments; all rights to payment under letters of
credit and similar agreements; all tax refunds (including, without
limitation, all federal and state income tax refunds and benefits of net
operating loss carry forwards); and all causes of action, rights, claims and
warranties now or hereafter owned or acquired by Debtor;
(i) all rights, claims and benefits of Debtor against any Person
arising out of, relating to or in connection with Collateral purchased by
Debtor, including, without limitation, any such rights, claims or benefits
against any Person storing or transporting such Collateral;
SECURITY AGREEMENT Page 3
(j) the balance of every bank account and deposit account of Debtor,
including without limitation all accounts on deposit with or under the
control of Secured Party or any affiliate of Secured Party, and any other
claim of Debtor against Secured Party, now or hereafter existing, liquidated
or unliquidated, and all money, instruments, securities, documents, chattel
paper, credits, claims, demands, income, and any other property, rights and
interests of Debtor which at any time shall come into the possession or
custody or under the control of Secured Party or any of its agents,
affiliates or correspondents, for any purpose, and the proceeds of any
thereof (Secured Party shall be deemed to have possession of any of the
Collateral in transit to or set apart for it or any of its agents, affiliates
or correspondents);
(k) all equity interest in any Person, any debt instrument issued by
any Person and any instrument convertible into any equity or debt interest
(whether owned beneficially or of record), including but not limited to all
shares of capital stock of whatever class, all partnership and joint venture
interests, all debentures and debt instruments (collectively, the
"SECURITIES"); all shares, securities, monies or properties representing a
Distribution (defined below) on any Securities or representing a distribution
or return of capital upon or in respect of any Securities or any part
thereof, or resulting from a split-up, revision, reclassification or other
like change of the Securities, or otherwise received in exchange therefor;
all subscription rights, warrants or options issued to the holders of, or in
respect of, the Securities; each certificate or other instrument evidencing
any of the foregoing;
(l) any declaration or payment of any distribution or dividend
(including a stock dividend) on, or the making of any pro rata distribution,
loan, advance, or investment to or in any holder (in its capacity as a
partner, shareholder or other equity holder) of, any partnership interest or
shares of capital stock or other equity interest of such Person; any
purchase, redemption, or other acquisition or retirement for value of any
shares of partnership interest or capital stock or other equity interest of
such Person; and any payments of principal of, and interest on, and all other
payments in respect of any debt issued by any Person (all of the foregoing
being herein referred to as collectively "DISTRIBUTIONS");
(m) all accounts of Debtor maintained with or through any other Person
or Persons related to the acquisition, ownership, sale or other disposition
of any interest in any security or interest in any security (including but
not limited to all interest in any equity or debt security, option, warrant,
put, call, futures agreements, commodity agreements, margin accounts, short
positions and partnership interests), each deposit account (time, demand or
other) in which any proceeds of or income from the foregoing may be on
deposit, all general intangibles consisting of the foregoing and each
agreement, document or instrument governing or evidencing any of the
foregoing and all amendments and restatements thereof, and all claims of
Debtor against any Person with respect to any of the foregoing (all of the
foregoing being herein referred to as "BROKERAGE AGREEMENTS");
(n) all agreements with vendors and distributors of Inventory;
SECURITY AGREEMENT Page 4
(o) all insurance policies and bonds and claims relating to any
property described in this SECTION 1.01 and payments thereunder;
(p) all cars, trucks, trailers, construction and earth moving equipment
and other vehicles, whether or not covered by a certificate of title under
the law of any state, and all tires and other appurtenances to any of the
foregoing (collectively "VEHICLES");
(q) all other personal property now owned or hereafter acquired by
Debtor; and
(r) all accessions to, all substitutions for and replacements of, and
all proceeds and products of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of the
types described in this SECTION 1.01) and, to the extent not otherwise
included, all (i) payments under insurance (whether or not Secured Party is
the loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral and (ii) all cash.
1.02. DESCRIPTION OF OBLIGATIONS. This Security Agreement creates a
first priority security interest securing the payment and performance of any
and all obligations, indebtedness and/or liabilities whether now existing or
hereafter arising, of Debtor to Secured Party, including, without limitation,
any and all obligations, indebtedness and/or liabilities of Debtor under the
Credit Agreement, the Note and the other Loan Documents, including any
extensions, modifications, substitutions, amendments, renewals and
restatements thereof, whether for principal, interest, fees, premium,
expenses, indemnification or otherwise (all such obligations, indebtedness
and/or liabilities being referred to herein as the "OBLIGATIONS"). Without
limiting the generality of the foregoing, this Security Agreement secures the
payment of all amounts which constitute part of the Obligations and would be
owed to Secured Party, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving Debtor or any other Person.
1.03. DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed, (b) the exercise by Secured
Party of any of the Rights hereunder shall not release Debtor from any of its
duties or obligations under the contracts and agreements included in the
Collateral, and (c) Secured Party shall not have any obligation or liability
under the contracts and agreements included in the Collateral by reason of
this Security Agreement, nor shall Secured Party be obligated to perform any
of the obligations or duties of Debtor thereunder or to take any action to
correct or enforce any claim for payment assigned hereunder, to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any account or Receivable (or any agreement giving rise thereto)
or under any contract, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
SECURITY AGREEMENT Page 5
1.04. DELIVERY OF SECURITY COLLATERAL. All certificates or
instruments representing or evidencing the Collateral shall be delivered to
and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party. After the occurrence of an Event of
Default, Secured Party shall have the right, at any time in its discretion
and without notice to Debtor, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Collateral. In
addition, after the occurrence of any Default, Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing Collateral for certificates or instruments of smaller or larger
denominations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants, with respect to itself and the Collateral, as follows:
(a) All of the Inventory and Equipment pledged by Debtor hereunder
(other than any Inventory pledged by Debtor to Secured Party pursuant to the
Collateral Assignment [as defined below]) is located at the places specified
on SCHEDULE 1 hereto or in transit to a place specified on SCHEDULE 1 hereto,
or in transit for sale to a third-party purchaser that upon such sale will
become the obligor under a Receivable in the ordinary course of Debtor's
business. The chief place of business and chief executive office of Debtor
is located at 00000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, and
such location is where Debtor keeps all of its books and records. All
promissory notes or other instruments evidencing the Receivables have been
delivered and pledged to Secured Party duly endorsed and accompanied by such
duly executed instruments of transfer or assignment as are necessary for such
pledge, to be held as pledged collateral. Debtor has possession and control
of the Inventory and Equipment pledged by it hereunder.
(b) Debtor is the legal and beneficial owner of all the Collateral free
and clear of any lien or security interest, option or other charge or
encumbrance except for (i) the security interest created by this Security
Agreement and (ii) any Permitted Liens. No effective financing statement or
other similar document used to perfect and preserve a security interest under
the Laws of any jurisdiction covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
Secured Party relating to (A) this Security Agreement, and (B) that certain
Collateral Assignment and Security Agreement (the "COLLATERAL ASSIGNMENT"),
dated August 1, 1997, by and between Debtor and Secured Party.
(c) As of the date hereof, Debtor has the trade names set forth on
SCHEDULE 2 and no others.
SECURITY AGREEMENT Page 6
(d) This Security Agreement and the pledge of the Collateral pursuant
hereto creates a valid first priority security interest (subject only to such
Permitted Liens as may cover the Collateral) in the Collateral (other than
deposit accounts in financial institutions which are not Secured Party),
securing the payment of the Obligations, and upon filing of financing
statements with the Texas Secretary of State and any other necessary actions
to perfect such security interest, such first priority security interest in
such Collateral will be duly perfected; and all filings and other actions
necessary or desirable to perfect and protect such security interest and such
priority have been duly taken (or will be taken).
(e) The amount represented by Debtor to Secured Party from time to time
as owing by each account debtor or by all account debtors in respect of the
Accounts and Receivables will at such time be the correct amount actually
owing by such account debtor or debtors thereunder. No amount payable to
Debtor under or in connection with Accounts or Receivables is evidenced by
any Instrument or Chattel Paper, other than checks and other similar
negotiable instruments, which has not been delivered to Secured Party.
(f) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any tribunal is required
(i) for the pledge by Debtor of the Collateral pledged by it hereunder, for
the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by Debtor,
other than as permitted by SECTION 1.01(e) hereof, (ii) for the perfection or
maintenance of the pledge, assignment and security interest created hereby
(including the first priority nature of such pledge, assignment and security
interest) or (iii) for the exercise by Secured Party of the Rights provided
for in this Security Agreement or the remedies in respect of the Collateral
pursuant to this Security Agreement; provided, that if at any time subsequent
to the Closing Date Lender requests that Debtor obtain any consent not
required under clause (i) above, Debtor agrees pursuant to SECTION 3.01(a) to
use its best efforts in obtaining such consent.
(g) Debtor owns no Securities or Instruments except as listed on
SCHEDULE 3, and Debtor has no interest in any Brokerage Agreements except as
listed on SCHEDULE 4. Debtor is the sole legal and beneficial owner of the
Securities and Instruments listed on SCHEDULE 3 and the Brokerage Agreements
listed on SCHEDULE 4, and no Lien upon such Securities, Instruments or
Brokerage Agreements exists, except for those Liens in favor of Secured Party
created or provided for herein. To Debtor's knowledge, no event has occurred
which has or could cause the termination of any Brokerage Agreement.
(h) All Vehicles owned by Debtor are described on SCHEDULE 5.
(i) All Inventory produced in the United States of America has been
produced in compliance in all material respects with the Fair Labor Standards
Act.
(j) Debtor has the corporate power and authority and the legal right to
execute and deliver, to perform its obligations under, and to grant the
security interest in the Collateral
SECURITY AGREEMENT Page 7
pursuant to, this Security Agreement, and Debtor has taken all necessary
corporate action to authorize its execution, delivery and performance of, and
grant of the security interest in the Collateral pursuant to this Security
Agreement. The board of directors of Debtor have determined that the
execution and delivery of this Security Agreement by Debtor is in the best
interests of Debtor and Debtor will derive substantial benefit, directly or
indirectly, from the extensions of credit by Secured Party to Borrower under
the Credit Agreement and the Note.
(k) This Security Agreement constitutes a legal, valid and binding
obligation of Debtor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
(l) The execution, delivery and performance of this Security Agreement
will not violate any provision of any applicable law, rule, regulation or
contractual obligations of Debtor and will not result in the creation or
imposition of any lien on any of the properties or revenues of Debtor
pursuant to any applicable law, rule, regulation or contractual obligations
of Debtor, except as contemplated hereby.
(m) No consent or authorization of, filing with, or other act by or in
respect of, any tribunal, and no consent of any other person (including,
without limitation, any stockholder or creditor of Debtor), is required in
connection with the execution, delivery, performance, validity or
enforceability of this Security Agreement.
(n) No action, suit or proceeding of or before any court, arbitrator or
any governmental body, agency or official is pending or, to the knowledge of
Debtor, threatened by or against Debtor or against any of its properties or
revenues with respect to this Security Agreement or any of the transactions
contemplated hereby.
(o) There are no conditions precedent to the effectiveness of this
Security Agreement that have not been satisfied or waived.
ARTICLE III
COVENANTS
3.01. FURTHER ASSURANCES. (a) Debtor agrees that, where any
agreement existing as of the date hereof or hereafter to which Debtor is a
party contains any restriction prohibiting Debtor from granting any security
interest under this Security Agreement, Debtor will use its best efforts to
obtain the necessary consent to or waiver of such restriction from any Person
so as to enable Debtor to effectively grant to Secured Party such security
interest under this Security Agreement.
(b) Debtor will from time to time at its expense promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that Secured Party may reasonably
request, in order to perfect and protect any pledge,
SECURITY AGREEMENT Page 8
assignment or security interest granted or purported to be granted hereby,
and the priority thereof, or to create or preserve the full benefits of this
Security Agreement and the rights and powers of Secured Party herein granted,
or to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any of the Collateral. Without limiting the
generality of the foregoing, upon written request by Secured Party, Debtor
will: (i) xxxx conspicuously each item of Chattel Paper included in
Receivables and each of its records pertaining to any other items of the
Collateral with the following legend:
THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO A
SECURITY AGREEMENT DATED AUGUST 1, 1997 (AS THE SAME MAY BE MODIFIED OR
RESTATED) MADE BY IWL COMMUNICATIONS, INC., IN FAVOR OF BANK ONE, TEXAS,
N.A.
or such other legend, in form and substance satisfactory to and as specified
by Secured Party, indicating that such item of Chattel Paper or Collateral is
subject to the pledge, assignment and security interest granted hereby; (ii)
if any Collateral shall be evidenced by a promissory note or other Instrument
or be Chattel Paper, deliver to Secured Party such note, Instrument or
Chattel Paper, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Secured
Party; and (iii) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Secured Party may request, in order to perfect
and preserve the pledge, assignment and security interest granted or
purported to be granted hereby with respect to any and all of the Collateral.
(c) Debtor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relating to all
or any part of the Collateral without the signature of Debtor where and to
the extent permitted by applicable law. A photocopy or other reproduction of
this Security Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where and to
the extent permitted by applicable law.
(d) Debtor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral, and such
other reports in connection with the Collateral, as Secured Party may
reasonably request.
(e) Debtor shall not establish or maintain any deposit or similar bank
account not listed on SCHEDULE 6 unless Secured Party receives prior written
notice thereof, Debtor executes and delivers to Secured Party assignments of
such account in such form as Secured Party may request, and the financial
institution in which such account will be maintained delivers to Secured
Party an acknowledgment of the assignment of such account in form and
substance satisfactory to Secured Party.
SECURITY AGREEMENT Page 9
(f) Debtor shall not permit any amendment, restatement or termination
of any Brokerage Agreement without the prior written consent of Secured
Party, which consent shall not be unreasonably withheld.
(g) In addition to such other information as shall be specifically
provided for herein, Debtor shall furnish to Secured Party such other
information with respect to the Collateral as Secured Party may reasonably
request from time to time in connection with the Collateral, or the
protection, preservation, maintenance or enforcement of the security interest
in the Collateral, including, without limitation, all documents and things in
Debtor's possession, or subject to its demand for possession, related to the
production and sale by Debtor, or any subsidiary, licensee or subcontractor
thereof, of products or services sold by or under the authority of Debtor,
including by way of example, without limiting the interest granted by this
Security Agreement: (i) all lists and ancillary documents which identify and
describe any of Debtor's customers, advertisers, or those of its subsidiaries
or licensees, for products sold or services rendered, including without
limitation, such existing lists and ancillary documents which contain each
customer's full name and address, the identity of the Person or Persons
having the principal responsibility on each customer's behalf for ordering
products or services of the kind supplied by Debtor, the credit, payment,
discount, delivery and other material sale terms applicable to such customer,
together with detailed information setting forth the total purchases and the
patterns of such purchases; (ii) all product and service specification
documents and production and quality of services sold; (iii) all documents
which reveal the names and addresses of all sources of supply, and all terms
of purchase and delivery, for all materials and components used in the
production of products or provision of services sold; and (iv) all documents
constituting or concerning the then current or proposed advertising and
promotion by Debtor or its subsidiaries, licensees or subcontractors of
products or services sold, including, by way of example and not in
limitation, all documents which reveal the media used or to be used and the
cost for all such advertising conducted within the described period or
planned for such products or services. In connection with its enforcement of
the security interest, Secured Party may use such information or transfer it
to any assignee or sublicensee permitted hereunder for such assignee's or
sublicensee's use.
(h) Debtor shall, if any of the shares, securities, monies or property
pledged or required to be pledged under SECTION 1.01 are received by Debtor,
forthwith transfer and deliver to Secured Party such shares, securities,
monies or property so received by Debtor (together with the certificates for
any such shares and securities duly endorsed in blank or accompanied by
undated stock powers duly executed in blank), all of which thereafter shall
be held by Secured Party, pursuant to the terms of this Security Agreement,
as part of the Collateral.
(i) Debtor shall, insofar as possible, upon the request of Secured
Party (if Secured Party deems such action necessary or advisable for the
perfection or priority of the security interest in the Securities and
Brokerage Agreements), cause the Securities and Brokerage Agreements to be
transferred, registered or otherwise put into the name or names of such
nominee or nominees of Secured Party as Secured Party shall from time to time
direct. So long as no Event of Default shall have occurred and be continuing
(and after any Event of Default until, by
SECURITY AGREEMENT Page 10
notice to Debtor, Secured Party elects while the Event of Default is
continuing to exercise the right to vote or consent), Debtor shall retain the
right to exercise all voting, consensual and other power of ownership
pertaining to the Securities and Brokerage Agreements owned by it for all
purposes not inconsistent with the terms of this Security Agreement or any
other Loan Document; and Secured Party shall execute and deliver to Debtor or
cause to be executed and delivered to Debtor all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without
recourse, as Debtor may reasonably request for the purpose of enabling Debtor
to exercise the rights and powers which it is entitled to exercise pursuant
to this SECTION 3.01(i). After the occurrence of a Default, whether or not
Secured Party exercises any available right to declare any Obligations due
and payable or seeks or pursues any other relief or remedy available under
applicable Laws or under any agreement relating to such Obligations, all
distributions and dividends on the Securities and payments and distributions
in respect of each Brokerage Agreement shall be paid directly to Secured
Party and retained by it as part of the Collateral subject to the terms of
this Security Agreement, and, if Secured Party shall so request, Debtor
agrees to execute and deliver to Secured Party appropriate additional
dividend, distribution and other orders and documents to that end.
3.02. INVENTORY AND EQUIPMENT.
(a) Debtor shall keep all of the Inventory and Equipment (other than
Inventory sold in the ordinary course of business or pledged to Secured Party
pursuant to the Collateral Assignment) at the place or places specified
therefor in SECTION 2.01(A) or, upon fifteen days' prior written notice to
Secured Party, at such other places in such jurisdiction where all action
required by SECTION 3.01 shall have been taken with respect to such
transferred Inventory and Equipment.
(b) Debtor shall pay promptly when due or before penalty all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against,
the Collateral pledged by it hereunder, except such taxes as are being
contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP. Debtor shall comply
with, and shall cause its licensees to comply in all material respects with,
all requirements of the Fair Labor Standards Act.
3.03. INSURANCE. Debtor will, at its own expense, maintain, or
cause to be maintained, insurance on the Collateral as is reasonable and
customary, with Secured Party being named as loss payee and additional
insured on all insurance policies which pertain to the Collateral. If Debtor
fails to perform or observe any applicable covenants as to insurance on any
of such Collateral, Secured Party may at its own option obtain insurance on
such Collateral, and any premium therefor paid by Secured Party shall become
part of the Obligations and shall bear interest prior to the occurrence of an
Event of Default at the interest rate then applicable to the Note, and after
the occurrence of an Event of Default, at the Default Rate. In the event
Secured Party maintains such substitute insurance, the additional premium for
such insurance shall be due on demand and payable by Debtor to Secured Party
in accordance with any notice delivered to Debtor by Secured Party. Debtor
hereby grants Secured Party, a security interest in any refunds
SECURITY AGREEMENT Page 11
of unearned premiums in connection with any cancellation, adjustment or
termination of any policy of insurance required by Secured Party and in all
proceeds of such insurance and hereby appoints Secured Party its
attorney-in-fact to, after a Default, endorse any check or draft that may be
payable to Debtor in order to collect such refunds or proceeds. Any such
sums collected by Secured Party shall be credited, except to the extent
applied to the purchase by Secured Party of similar insurance, to any amounts
then owing on the Obligations.
3.04. PLACE OF PERFECTION; RECORDS; COLLECTION OF RECEIVABLES,
CHATTEL PAPER AND INSTRUMENTS.
(a) Debtor will not (i) change the location of its chief executive
office from that specified in SECTION 2.01(a), or (ii) change its name,
identity or corporate structure to such an extent that any financing
statement filed by Secured Party in connection with this Security Agreement
would become seriously misleading, or (iii) use any trade name other than
those listed on SCHEDULE 2, unless Debtor shall have given prior written
notice as soon as practicable thereof, and prior to effecting any such change
Debtor shall have taken such steps as Secured Party may deem necessary or
advisable to continue the perfection and priority of the security interest
granted pursuant hereto.
(b) Except as otherwise provided in this SECTION 3.04(b) or in any of
the other Loan Documents, Debtor shall continue to collect, at its own
expense, all amounts due or to become due Debtor under the Chattel Paper and
Instruments. In connection with such collections, Debtor may take (and, at
Secured Party's direction, shall take) such action as Debtor or Secured Party
may deem reasonably necessary or advisable to enforce collection of the
Chattel Paper and Instruments; PROVIDED, HOWEVER, that Secured Party shall
have the right upon the occurrence of an Event of Default (without notice to
Debtor) to notify the account debtors or obligors under any or all of the
Collateral of the assignment of such Collateral to Secured Party and to
direct such account debtors or obligors to make payment of all amounts due or
to become due to Debtor thereunder directly to Secured Party and, after the
occurrence of a Default, at the expense of Debtor, to enforce collection of
any such Collateral and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor shall have been
entitled. After the occurrence of a Default, all Instruments, amounts and
proceeds received by Debtor in respect of the Collateral shall be received in
trust for the benefit of Secured Party hereunder, shall be segregated from
other funds of Debtor and shall be forthwith paid over to Secured Party in
the same form as received (with any necessary endorsement) to be held as
collateral or applied to the Obligations, or such portion of the Obligations
as the Secured Party shall deem necessary or appropriate. Except prior to
the occurrence of a Default and in accordance with Debtor's normal business
policies and practices in effect on the date hereof, Debtor shall not adjust,
settle or compromise the amount or payment of any Receivable, Chattel Paper
or Instrument, release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon.
SECURITY AGREEMENT Page 12
3.05. TRANSFERS AND OTHER LIENS. Debtor shall not (i) sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, or (ii) create or permit to
exist any lien, security interest, option or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interests
in favor of Secured Party under this Security Agreement and the Collateral
Assignment or any Permitted Lien.
3.06. RIGHTS TO DIVIDENDS AND DISTRIBUTIONS. With respect to any
certificates, bonds, or other instruments or securities (including but not
limited to any certificate or participation issued in any proceeding under
any Debtor Relief Law constituting a part of the Collateral, Secured Party
shall have authority after the occurrence of an Event of Default, without
notice to Debtor, either to have the same registered in Secured Party's name
or in the name of a nominee, and, with or without such registration, to
demand of the issuer thereof, and to receive any and all Distributions
(including any stock or similar dividend or distribution) payable in respect
thereof, whether they be ordinary or extraordinary. If Debtor shall become
entitled to receive or shall receive any interest in or certificate
(including, without limitation, any interest in or certificate representing a
Distribution or a distribution in connection with any reclassification,
increase, or reduction of capital, or issued in connection with any
reorganization), or any option or rights arising from or relating to any of
the Collateral, whether as an addition to, in substitution of, as a
conversion of, or in exchange for any of the Collateral, or otherwise, Debtor
agrees to accept the same as Secured Party's agent and to hold the same in
trust on behalf of and for the benefit of Secured Party, and to deliver the
same immediately to Secured Party in the exact form received, with
appropriate undated stock or similar powers, duly executed in blank, to be
held by Secured Party, subject to the terms hereof, as Collateral. After the
occurrence of a Default, Secured Party shall be entitled to all
Distributions, and to any sums paid upon or in respect of any Collateral,
upon the liquidation, dissolution, or reorganization of the issuer thereof
which shall be paid to Secured Party to be held by it as additional
collateral security for the Obligations and application to the Obligations at
the discretion of Secured Party. All Distributions paid or distributed in
respect of the Collateral which are received by Debtor in violation of this
Security Agreement shall, until paid or delivered to Secured Party, be held
by Debtor in trust as additional Collateral for the Obligations.
3.07. RIGHT OF SECURED PARTY TO NOTIFY ISSUERS. After the
occurrence of an Event of Default, Secured Party may notify issuers of the
Instruments and Securities to make payments of all Distributions directly to
Secured Party, and Secured Party may take control of all proceeds of any
Instruments and/or Securities. Until Secured Party elects to exercise such
Rights, Debtor, as agent of Secured Party, shall collect and segregate all
Distributions and other amounts paid or distributed with respect to the
Instruments and Securities.
3.08. MAINTENANCE OF RECORDS. Debtor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Accounts and Receivables. Debtor will
xxxx its books and records pertaining to the Collateral to evidence this
Security Agreement and the security interests granted hereby.
SECURITY AGREEMENT Page 13
3.09. RIGHT OF INSPECTION. Secured Party and its officers, agents
and representatives shall have the right to inspect Debtor's books and
records upon request of Secured Party. Upon notice to Debtor, Secured Party
and its officers, agents and representatives shall at all reasonable times
also have the right to enter into and upon any premises where any of the
Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein; provided,
that each such inspection shall be conducted during normal business hours.
It is understood and agreed, however, that Debtor may operate its facilities
under restrictions as a "secured area" for classified governmental projects,
and in such event Secured Party agrees to abide by the rules generally
imposed on access to such areas, including advance notice and use of escorts.
3.10. COMPLIANCE WITH TERMS OF CONTRACTS, ETC. Debtor will perform
and comply in all material respects with all its obligations under all its
other contractual obligations relating to the Collateral, including, without
limitation, Debtor's contractual obligations pursuant to each of the
Contracts listed on SCHEDULE 3.
3.11. PAYMENT OF OBLIGATIONS. Debtor will pay promptly when due all
taxes and claims with respect to the Collateral, or in respect of its income
or profits therefrom.
3.12. LIMITATION ON LIENS ON COLLATERAL. Debtor will not create,
assume or permit to exist, will defend the Collateral against, and will take
such other action as is necessary to remove, any lien, security interest or
claim in or to the Collateral, other than the security interest and liens
created hereby and any Permitted Liens, and will defend the right, title and
interest of Secured Party in and to any of the Collateral against the claims
and demands of all Persons whomsoever.
3.13. LIMITATIONS ON DISPOSITIONS OF COLLATERAL. Debtor will not
sell, transfer, lease, abandon or otherwise dispose of any of the Collateral,
or attempt, offer or contract to do so, other than in the ordinary course of
business and for full and fair consideration as provided in the Credit
Agreement. Debtor will not sell, transfer, lease, abandon or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so
without the prior written consent of Lender, except for sales of Inventory in
the ordinary course of business and for full and fair consideration.
3.14. LIMITATIONS ON MODIFICATIONS, WAIVERS, EXTENSIONS OF
AGREEMENTS GIVING RISE TO ACCOUNTS AND CONTRACTS. Debtor will not (i) amend,
modify, terminate or waive any provision of any contract or any agreement
giving rise to a Receivable in any manner, except in the ordinary course of
business, (ii) fail to exercise promptly and diligently each and every
material right which it may have under each contract and each agreement
giving rise to a Receivable (other than any right of termination), unless
prior to the occurrence of an Event of Default Debtor, in the exercise of its
reasonable business judgment, determines to do so, or (iii) fail to deliver
to Secured Party a copy of each material demand, notice or document received
by it relating in any way to any contract or any agreement giving rise to a
Receivable.
SECURITY AGREEMENT Page 14
3.15. MAINTENANCE OF EQUIPMENT. Debtor will maintain in good
working order each item of Equipment which is necessary for the operation of
Debtor's business.
3.16. FURTHER IDENTIFICATION OF COLLATERAL. Debtor will furnish to
Secured Party from time to time upon request statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may reasonably request, all
in reasonable detail and in form satisfactory to Secured Party.
3.17. NOTICES. Debtor will advise Secured Party promptly, in
reasonable detail, (i) of any lien or security interest on, or claim asserted
against, any of the Collateral, and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral hereunder.
ARTICLE IV
RIGHTS AND POWERS OF SECURED PARTY
4.01. SECURED PARTY MAY PERFORM. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Debtor as provided in SECTION 4.05.
4.02. LIMITATION ON SECURED PARTY'S DUTIES. The powers conferred on
Secured Party hereunder are solely to protect its interest in the Collateral
and shall not impose any duty upon it or any Secured Party to exercise any
such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured
Party shall have no duty as to any of the Collateral, as to ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or not Secured
Party has or is deemed to have knowledge of such matters, or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Secured Party accords its own property.
Except as provided in this SECTION 4.02, Secured Party shall not have any
duty or liability to protect or preserve any Collateral or to preserve rights
pertaining thereto. Nothing contained in this Security Agreement shall be
construed as requiring or obligating Secured Party, and Secured Party shall
not be required or obligated, to (a) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(b) notify Debtor of any decline in the value of any Collateral. Secured
Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under SECTION 9.207 of the
UCC or otherwise, shall be to deal with it in the same manner as Secured
Party deals with similar property for its own account. Neither Secured
Party, nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part
SECURITY AGREEMENT Page 15
of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Debtor or otherwise.
4.03. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. Debtor hereby irrevocably constitutes and appoints Secured
Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Debtor and in the name of Debtor or in
its own name, after the occurrence of an Event of Default, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, Debtor
hereby gives Secured Party the power and right, on behalf of Debtor, without
notice to or assent by Debtor, to do the following:
(1) in the case of any Collateral, in the name of Debtor or its own
name, or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under, or with respect to, any Collateral and to file any claim
or to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Secured Party for the purpose of
collecting any and all such moneys due or with respect to such Collateral
whenever payable;
(2) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof; and
(3) (i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to Secured Party or as Secured Party shall direct;
(ii) to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any
time in respect of or arising out of any Collateral; (iii) to sign and
endorse any invoices, freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral;
(iv) to commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral
or any portion thereof and to enforce any other right in respect of any
Collateral; (v) to defend any suit, action or proceeding brought against
Debtor with respect to any Collateral; (vi) to settle, compromise or
adjust any suit, action or proceeding described in the
SECURITY AGREEMENT Page 16
preceding clause and, in connection therewith, to give such discharges or
releases as Secured Party may deem appropriate; (vii) to assign any
trademark (along with the goodwill of the business to which any such
trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as Secured Party shall in its sole
discretion determine; and (viii) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do, at Secured Party's
option and Debtor's expense, at any time, or from time to time, all acts
and things which Secured Party deems necessary to protect, preserve or
realize upon the Collateral and the liens of Secured Party thereon and to
effect the intent of this Security Agreement, all as fully and effectively
as Debtor might do.
This power of attorney is power coupled with an interest and shall be
irrevocable until the Obligations shall have been paid in full or this
Security Agreement shall have been terminated.
(b) OTHER POWERS. Debtor also authorizes Secured Party, at any time
and from time to time, to execute, in connection with any sale provided for
in SECTION 4.04, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) NO DUTY ON THE PART OF SECURED PARTY. The powers conferred on
Secured Party hereunder are solely to protect the interests of Secured Party
in the Collateral and shall not impose any duty upon Secured Party to
exercise any such powers. Secured Party shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees or agents shall
be responsible to Debtor for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct, IT BEING THE INTENT OF THE
PARTIES HERETO THAT SECURED PARTY SHALL NOT BE ACCOUNTABLE FOR ITS OWN
NEGLIGENCE.
4.04. REMEDIES. If an Event of Default shall occur and be
continuing, Secured Party may exercise, in addition to all other rights and
remedies granted to it in this Security Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all rights
and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Secured Party, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon Debtor or
any other Person (all and each of which demands, advertisements and notices
are hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of Secured
Party or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Secured Party shall have the
right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale
SECURITY AGREEMENT Page 17
or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in Debtor, which right or equity is
hereby waived and released. Debtor further agrees, at Secured Party's
request, to assemble the Collateral and make it available to Secured Party at
places which Secured Party shall reasonably select, whether at Debtor's
premises or elsewhere. Secured Party shall apply the net Proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements,
to the payment in whole or in part of the Obligations, in such order as
Secured Party may elect, and only after such application and after the
payment by Secured Party of any other amount required by any provision of
law, need Secured Party account for the surplus, if any, to Debtor. To the
extent permitted by applicable law, Debtor waives all claims, damages and
demands it may acquire against Secured Party arising out of the exercise by
them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least five (5) days before such sale
or other disposition. Debtor shall remain liable for any deficiency if the
Proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Obligations and the fees and disbursements of any attorneys
employed by Secured Party to collect such deficiency.
4.05. INDEMNITY AND EXPENSES. (a) Debtor agrees to indemnify Secured
Party from and against any and all claims, damages, losses, liabilities,
costs and expenses of any kind (including reasonable attorneys' fees) arising
out of or resulting from this Security Agreement or the security interest
granted herein, or any of the Collateral (including, without limitation,
enforcement of this Security Agreement), EXPRESSLY INCLUDING SUCH CLAIMS,
LOSSES OR LIABILITIES ARISING OUT OF MERE NEGLIGENCE OF SECURED PARTY, except
claims, losses or liabilities resulting from Secured Party's gross negligence
or willful misconduct.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which Secured Party may incur in
connection with (i) the administration of this Security Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder or (iv) the
failure by Debtor to perform or observe any of the provisions hereof. Any
such amounts so made shall be a part of the Obligation, shall be payable upon
demand, and if not paid upon demand shall bear interest at the Default Rate
(as defined in the Notes).
ARTICLE V
MISCELLANEOUS
SECURITY AGREEMENT Page 18
5.01. CUMULATIVE RIGHTS. All Rights of Secured Party under the Loan
Documents are cumulative of each other and of every other Right which Secured
Party may otherwise have at Law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligations. The exercise of one or more Rights shall not
prejudice or impair the concurrent or subsequent exercise of other Rights.
5.02. MODIFICATIONS; AMENDMENTS; SCHEDULES; ETC. No amendment or
waiver of any provision of this Security Agreement, and no consent to any
departure by Debtor herefrom, shall in any event be effective unless the same
shall be in writing and signed by Secured Party and Debtor, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Upon any change in any information
disclosed on any Schedule hereto, Debtor shall promptly prepare and deliver
to Secured Party a replacement schedule, indicating its effective date, in
form and substance satisfactory to Secured Party, and amendments to and
additional financing statements as Secured Party may require to preserve and
perfect a first priority security interest in the Collateral.
5.03. CONTINUING SECURITY INTEREST. This Security Agreement shall
create a continuing security interest in the Collateral and shall be in full
force and effect until the later of (i) the final payment in full of the
Obligations and all amounts payable under this Security Agreement and (ii)
the expiration or termination of the obligations of Secured Party to extend
credit to Debtor. Upon any such termination, Secured Party will, at Debtor's
expense, execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence such termination.
5.04. GOVERNING LAW; TERMS. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS. UNLESS
OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN ARTICLE 9
OF THE UCC ARE USED HEREIN AS THEREIN DEFINED.
5.05. WAIVER OF JURY TRIAL. DEBTOR HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
5.06. SECURED PARTY'S RIGHT TO USE AGENTS. Secured Party may
exercise its Rights under this Security Agreement through an agent,
representative, attorney or other designee.
SECURITY AGREEMENT Page 19
5.07. NO INTERFERENCE, COMPENSATION OR EXPENSE. Secured Party may
exercise its Rights under this Security Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.
5.08. WAIVERS OF RIGHTS INHIBITING ENFORCEMENT. Debtor waives (a)
any claim that, as to any part of the Collateral, a public sale, should the
Secured Party elect so to proceed, is, in and of itself, not a commercially
reasonable method of sale for such Collateral, (b) except as otherwise
provided in this Security Agreement, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY SUCH RIGHT THAT DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION
OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER
REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE WITH RESPECT TO THE
ENFORCEMENT OF SECURED PARTY'S AND ALL OTHER RIGHTS HEREUNDER and (c) all
rights of redemption, appraisal or valuation.
5.09. NOTICES AND DELIVERIES. All notices, communications and
materials to be given or delivered pursuant to this Security Agreement shall
be delivered in accordance with SECTION 7.6 of the Credit Agreement.
5.10. ENTIRE AGREEMENT. THIS SECURITY AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES.
5.11. SUCCESSORS AND ASSIGNS. All of the provisions of this
Security Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
5.12. LOAN DOCUMENT. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
5.13. SEVERABILITY. If any provision of this Security Agreement is
held to be illegal, invalid, or unenforceable under present or future Laws
during the term hereof, such provision shall be fully severable, this
Security Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or
by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of this
Security Agreement a legal, valid, and enforceable provision as similar in
terms to the illegal, invalid, or unenforceable provision as may be possible.
SECURITY AGREEMENT Page 20
5.14. OBLIGATIONS NOT AFFECTED. To the fullest extent permitted by
applicable Law, the obligations of Debtor under this Security Agreement shall
remain in full force and effect without regard to, and shall not be impaired
or affected by:
(a) any amendment or modification or addition or supplement to any Loan
Document, any instrument delivered in connection therewith or any assignment
or transfer thereof;
(b) any exercise, non-exercise, or waiver by Secured Party of any
Right, remedy, power or privilege under or in respect of, or any release of
any guaranty, any collateral or the Collateral or any part thereof provided
pursuant to, this Security Agreement or any other Loan Document;
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Security Agreement or any other Loan Document or
any assignment or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor, or any other
Person, whether or not Debtor shall have notice or knowledge of any of the
foregoing.
5.15. COUNTERPARTS. This Security Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
SECURITY AGREEMENT Page 21
IN WITNESS WHEREOF, Debtor and Secured Party have duly executed and
delivered this Security Agreement effective as of the date first above
written.
Address of Debtor: DEBTOR:
IWL Communications, Inc. IWL COMMUNCATIONS, INC. a Texas corporation
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxx Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000 ----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
--------------------------------------
Title: CFO
-------------------------------------
Address of Secured Party: SECURED PARTY:
Bank One, Texas, N.A. BANK ONE, TEXAS, N.A.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Commercial Banking By: /s/ Xxxx Xxxx
Department ----------------------------------------
Telecopy No.: (000) 000-0000 Name: Xxxx Xxxx
--------------------------------------
Title: Vice President
-------------------------------------
SECURITY AGREEMENT Page 22
SCHEDULE 1
Inventory Locations
------------------------------------------------------------------------------
Debtor maintains the following locations where Inventory and Equipment
pledged under this Security Agreement are kept:
1.
2.
3.
SCHEDULE 1 TO SECURITY AGREEMENT Page 1
SCHEDULE 2
Trade Names
------------------------------------------------------------------------------
The following trade names are used by Debtor:
SCHEDULE 2 TO SECURITY AGREEMENT Page 1
SCHEDULE 3
Securities and Instruments; Contracts
------------------------------------------------------------------------------
Debtor owns or is a party to the following securities or instruments:
Debtor is a party to the following contracts:
SCHEDULE 3 TO SECURITY AGREEMENT Page 1
SCHEDULE 4
Brokerage Agreements
------------------------------------------------------------------------------
SCHEDULE 4 TO SECURITY AGREEMENT Page 1
SCHEDULE 5
Vehicles
------------------------------------------------------------------------------
SCHEDULE 5 TO SECURITY AGREEMENT Page 1
SCHEDULE 6
Bank Accounts
------------------------------------------------------------------------------
SCHEDULE 6 TO SECURITY AGREEMENT Page 1
